You could just hear the groans, sighs, oooooohs and aaaaaahs on trading desks across the country last night as GOOG earnings crossed the tape. A buck twenty-two?!? Must be a mis-print. A buck fifty-four?!? Must be a mis-print. Quick calculate the difference between a 41% and 30% tax rate. Nope…still doesn’t quite get to the average estimate of $1.77 or the whisper of $2.00. That’s definitely a miss.
This is the effect Intel (INTC) used to have during earnings season. The market hasn’t had an "important" company like this in a long time so it’s nice to see someone new pick up the "too-important-to-miss-earnings" baton. It reveals that the evolution from a PC-centric world to an Internet-centric world is about complete. While it’s silly to put this much weight on one company, it’s also lots of fun. It’s like watching the Super Bowl – at least if you’re not long.
So let’s go to the charts…
I’m guessing that GOOG will find itself in a giant trading range between $400 at the top and $290 – $320 at the bottom. The bottom is marked by a strong area of support and a gap created from the last earnings surprise. I would expect the bottom range to be tested at some point in the near future, so I’m not looking to buy until the stock cools off some more.
The other point of note is that Yahoo (YHOO) doesn’t look nearly so antiquated anymore. I think the market assumed that YHOO was losing share to GOOG and that caused their miss. While I think some of that is true, since GOOG’s Adsense is just smoking, GOOG’s miss makes YHOO look a lot better. It turns out that the companies should still be considered equals rather than winner and loser.